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Eliminate Debt, Without Giving Up Anything: Here’s how

by: Bill Pratt

Tired of owing money all the time? What if there was a systematic way of eliminating debt, without giving anything up that you currently enjoy? In fact, what if I could show you how to actually enjoy life more and spend more while paying off your debt?

It’s called the 50% Solution. It’s not magic, just common sense, and a little discipline.

Here’s how it works. Let’s say you get your first job and you make $30,000. You are able to pay your rent, make the minimum payments on your student loans, and have a little left over to eat and play. In one year you get a $2,400 raise. That comes out to $200 per month for those of you following with a calculator.

Now, if you take $100 and add it towards your student loan, or your car payment, or into savings if you have no debt, you will still have an extra $100 per month to play with. In other words, you took 50% of your raise and used it towards debt and the other 50% towards increasing your lifestyle. Now let’s assume you get a $500 bonus. You do the same thing. Take $250 and spend it on whatever you want. Take the other $250 and put it in savings or towards paying off a debt. Tax refund? Spend half, save half.

What if you will not get a raise anytime soon? Many of you get two extra paychecks per year (if you are paid every two weeks). Since your spending pattern is based on a monthly income, your two extra paychecks are like bonuses. Use half of each extra check towards savings or debt payments and the other half is yours to do what you want with. It’s simple and guilt free.

Each time you get a raise or bonus, you are taking half to increase your immediate lifestyle, and the other half to end up with a future full of unimaginable wealth. If you followed this principle for five years with an average pay increase of just $2,000 per year, you would have an extra $420 each month going towards paying off your debt. With your debt easily paid off, you will have increased your standard of living substantially. You’ll also have more money to put into savings—or to invest—than what most people twice your age have available to them.

Most of all, you have not fallen into the trap of always spending more than your next pay raise. If you can avoid that, you could be a millionaire in your forties. Your friends, who were buying luxury cars in their twenties and living above their means, will still have 20 years of slaving away at work, while you will be able to retire early or start your own business. It’s not magic; just a common sense, practical plan that you can easily follow while still enjoying life.

Are you in debt? Find a lower interest rate.
Bill Pratt is a former credit card executive turned student-advocate. He is the author of Extra Credit: The 7 Things Every College Student Needs to Know About Credit Debt & Ca$h. Bill speaks at colleges to educate and entertain students about real-life issues in money, leadership and success. His goal is to help students succeed personally and financially so they can improve the lives of those around them. You can learn more at www.ExtraCreditBook.com.